The Role of Insurance in Personal Injury Trials

Defendants’ Liability Insurance

The vast majority of all personal injury awards are paid, not by individual defendants, but instead by the individual defendants’ insurance companies. Automobile owners, business owners and homeowners regularly pay significant premiums to insurance companies for the express purpose of insuring against liability to third parties. Thus, when an insured individual negligently causes injury to a third party, it is typically that person’s insurance company which defends against, and pays for, any claims brought by the third party.

Notably, the fact that a defendant has liability insurance which will cover both the defendant’s legal fees and the amount of any judgment is information that is typically kept secret from the jury. Our courts routinely prevent jurors from hearing about applicable insurance coverage on the grounds that jurors' decisions might be influenced improperly by consideration of who would pay for any judgment. 11 Minn. Prac. 411.01. Specifically, the courts are concerned that jury verdicts might increase in magnitude if jurors were informed that a wealthy insurance company would be paying the judgment.

Unfortunately, hiding the existence of liability insurance from the jury often creates an even worse consequence. “Modern jurors are aware that insurance may be involved in personal injury litigation.” 11 Minn. Prac. 411.01. As such, jurors coming into a trial often have an expectation that the defendant probably carries liability insurance. When evidence of insurance is kept hidden, many jurors then make the inaccurate assumption that the defendant must not be insured. This assumption, that there is no insurance, is dangerous because it can cause jurors to improperly reduce the amount of their verdicts in an effort to avoid putting too much economic burden on an individual defendant.

Plaintiffs’ Health Insurance

Generally, where a plaintiff has received or will receive health insurance payments (or disability payments), the judge must reduce any verdict awarded to the plaintiff by the amount of any insurance or disability payments which have been, or will be made to plaintiff. M.S.A. § 548.36. This practice ensures that no plaintiff will receive double recovery for his or her injuries.

Just as the existence of a defendant’s liability insurance is typically not admissible at trial, the existence or non-existence of a plaintiff’s health or disability insurance is also generally excluded. The fact that such evidence is excluded has little overall effect, as any jury award which might be duplicative of insurance payments will be reduced by the amount of such insurance payment.

Insurance Company Propaganda

Insurance companies are among the most profitable and powerful corporations in the world. Like all businesses, such companies are driven by self interest, i.e., the desire to make as much money as possible. Insurance company CEOs earn multi-million dollar salaries and are paid to make profits. So, while the insurance companies are all too happy to take a consumer’s money when selling a policy, they are often unwilling to pay out when a loss occurs.

In an effort to protect and increase their profits, insurance companies pour huge sums of money into advertising campaigns and legislative lobbying efforts designed to help them avoid paying out on legitimate claims. Their advertising campaigns call for tort reform, and exaggerate the frequency of frivolous lawsuits, claiming that such lawsuits drive up the cost of insurance premiums.

Reality is very different from the propaganda put forth by the insurance companies and their PR firms. The truth is frivolous lawsuits make up a very small percentage of all suits that are filed. Moreover, insurance industry premiums are affected more by the performances of their investments than by the amounts they pay out to allegedly frivolous claims.

Our system of justice, while not perfect, is a very effective means of dispute resolution. In Minnesota, personal injury trials are decided by a jury of a person’s peers. Such jurors are presented with the relevant facts and are entrusted with the power to decide how each should be resolved. Jurors can spot a frivolous suit, and are well positioned to deny recovery when such a suit goes to trial. The reality is very few frivolous suits ever go to trial. Generally, plaintiffs’ personal injury attorneys are paid only if they prevail in a case. Frivolous lawsuits have a tendency of losing at trial. Thus, a plaintiffs’ attorney who makes a habit of taking frivolous lawsuits to trial would soon be out of business.

Our jury system is an effective means for providing compensation to those who need it, and for denying compensation to those who do not. Jurors should be allowed to make their decisions based upon the merits of the individual cases they hear, and not based on the propaganda put forth by the corporate insurance companies.